Social Media Casts A Glare On 'Due Diligence' For Diageo

Vijay Mallya, the flamboyant Indian businessman whose
Twitter hashtag is @THEVijayMallya, could be forgiven for feeling extra pleased with himself this morning.

In just a few days his public outbursts via Twitter on the demand he quit as chairman of USL Spirits Group - which is 55% owned by FTSE 100 company
Diageo in a £1.8bn ($2.7bn) acquisition - appear not only to have resonated with his 3.6m followers, but helped elicit a response in his favour. This is despite media coverage in India heavily weighted against his chances of staying on.

People and media revel in speculation sensationalisation and character bashing. Unfortunately for you I intend to continue as USL Chairman

Diageo asked Mallya to step down following “various improprieties and legal violations” were found after a probe it conducted into loans given by USL to various companies in the Mallya-led UB Group, reported India's Financial Express only this morning. Its story provides much of the detail of the inquiry.

The tone of the media coverage in India is reflected in this morning's FirstPost, with the headline: "Vijay Mallya is engaged in a losing battle with Diageo: he should 'bow out gracefully.'"

But also early this morning in London, via a regulatory announcement Diageo said:

The board of USL also resolved that, in the event Dr. Mallya declined to step down, it would recommend to the shareholders of the Company the removal of Dr. Mallya as a director and as the chairman of the board. Dr. Mallya has indicated he will not tender his resignation.

Diageo is the majority shareholder in USL with a 54.78% holding. As previously announced by Diageo, it has certain contractual obligations to support Dr. Mallya continuing as non-executive director and chairman of USL subject to certain conditions and in the absence of certain defaults.